Donor-Centered Planned Gift Marketing: (AFP Fund Development Series)

By Michael J. Rosen

A fresh step-by-step guide for identifying your nonprofit's planned giving prospects and inspiring them to give generously

Donor-Centered Planned Gift Marketing helps nonprofit organizations move beyond traditional marketing techniques that have historically yielded only modest results and reveals how putting the focus on the donor can produce the best outcomes for all. Here, nonprofits new to gift planning will learn to market effectively from the start while those with established programs will discover ways to enhance their efforts. You will learn about various donor-centered marketing channels and techniques, as well as how to generate internal support for an improved planned gift marketing effort.

• Full of useful and proven tips you can implement for immediate results
• Offers practical tools including forms and checklists
• Includes a worksheet to help organizations calculate their planned giving potential

Sharing the latest research findings, this book shows you how to identify who your planned giving prospects are. You will learn how to effectively focus on them through meaningful communication that ultimately inspires them to give-and give more.

• Language: English
• Publisher: Wiley
• Release date: Nov 29, 2010
• ISBN: 9780470915332

Michael J. Rosen

Michael J. Rosen was among those involved in the very first days of Thurber House and he continued to serve as its literary director for twenty years. Michael is the author of some 150 other books—poetry, young-adult novels, anthologies, picture books, cookbooks—for readers of all ages. Most recently, he has published James Thurber's Collected Fables, as well as a hefty monograph, A Mile and a Half of Lines: The Art of James Thurber, that coincides with an exhibition at the Columbus Museum of Art that he’s curated in honor of the Year of Thurber (2019).  He’s also an editor, ceramic artist, illustrator, and companion animal to a cattle dog named Chant.  www.michaeljrosen.com   

Book preview

CHAPTER 1

Introduction to Donor-Centered Marketing

Get wild with planned giving: Think of it as fundraising!

—Philip J. Murphy, Zimmerman Lehman

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After reading this chapter, you will be able to:

• Understand that all nonprofit organizations can secure planned gifts.

• Define donor-centered marketing.

• Describe the potential for planned gift growth for the nonprofit sector.

• Debunk five common myths about gift planning.

• Explain the fundamental marketing steps of a successful gift planning program.

Donors and prospective donors are not geese. However, one can learn something about how to treat these individuals from Aesop’s well-known fable The Goose That Laid the Golden Eggs. In this tale, a man owns a perfectly ordinary looking goose that happens to lay eggs of gold. However, the man becomes impatient with the goose. He wants all of the gold the goose has to offer immediately. So, imagining that the goose must be made of gold inside, the man kills the bird to get the entire store of gold all at once. Unfortunately, the man discovers too late that his goose is really just like any other.

In Aesop’s fable, the man succumbs to greed. He focuses on his own needs and desires. In the process, his inward focus results in the death of the goose and the loss of a vast treasure of gold. If the man had simply taken care of the goose, seeing to its needs, and if he had remained patient, waiting for the goose to lay her eggs on her schedule, he would have become fabulously well off.

Take Care of Donors: A Lesson from Aesop

Development professionals can learn from this tale. While a nonprofit organization’s mission is of critical importance, one must not let it overwhelm consideration of donors. Development professionals must take care of the needs of donors and prospects while respecting their individual lifecycles and personal decision-making schedules.

We have all heard of the Golden Rule—and many people aspire to live by it, writes President of Assessment Business Center, Tony Allesandra. He continues:

The Golden Rule is not a panacea. Think about it: Do unto others as you would have them do unto you. The Golden Rule implies the basic assumption that other people would like to be treated the way that you would like to be treated. That is patently false. In fact, it could be argued that the Golden Rule is a self-centered rule—and not unlike a traditional salesman who assumes his product is right for his prospect and approaches the sale without considering the prospect’s needs. In sales—and relationships—one size (yours) does not fit all. With the Golden Rule, you run a greater risk of creating conflict than chemistry. After all, people have different needs, wants, and ways of doing things. The alternative to the Golden Rule is much more productive. I call it the Platinum Rule: Treat others the way they want to be treated. Ah-hah! Quite a difference. The Platinum Rule accommodates the feelings of others. The focus of relationships shifts from this is what I want, so I’ll give everyone the same thing to let me first understand what they want and then I’ll give it to them. Building rapport with people based on the Platinum Rule requires some thought and effort, but it is the most insightful, rewarding, and productive way to interact with people.¹

By shifting the focus from the organization to donors and prospects, development professionals will achieve greater success and organizations will receive far greater benefit. By helping donors and prospects discover their philanthropic passion and by showing them how gift planning can help them realize their philanthropic aspirations while taking care of their loved ones, development professionals can perform a great service for these individuals while serving and benefiting the nonprofit organizations that employ them.

This process is the core of donor-centered planned gift marketing. Penelope Burk, in her book Donor-Centered Fundraising, describes what she means by the term,

Donor-centered fundraising is an approach to raising money and interacting with donors that acknowledges what donors really need and puts those needs first. Donor-centered fundraising impacts fundraising success in three ways. First, it retains more donors longer, giving them time to develop their own philanthropic resiliency; second, it causes more donors to offer increasingly generous gifts; and third, it raises the performance of even the most active and loyal donors to a new standard. Donor-centered fundraising aims its sights at our two worst enemies in fundraising: attrition and stagnation.²

By contrast, traditional, organization-focused fundraising has often concentrated on:

• Tools including philanthropic instruments like wills, trusts, life insurance, and so on.

• Techniques including direct mail, face-to-face visits, telephone appeals, and so on.

• The needs of the charitable organization.

• The community.

• The cause.

While tools, techniques, organization need, community benefit, and the cause itself are all important, the fact is that it is donors and prospective donors that are most important in the philanthropic process. So, while this book will certainly address these other items, it will do so while recognizing the fundamental importance of maintaining a donor-centered perspective.

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KEY CONCEPT

Always treat donors and prospective donors how they want to be treated. Keeping the focus on them will lead to greater benefit for the organization.

Planned Gift Marketing for All Organizations

Virtually all nonprofit organizations can ask for, receive, and benefit from planned gifts. Many already are. For the most part, those organizations that currently do not ask for planned gifts probably should, yet may not be doing so out of a misplaced sense of fear rather than any legitimate reason. For example, one misguided fear is that a bequest donor will give less to the annual fund. However, the Center on Philanthropy at Indiana University has found that bequest donors actually give more than twice as much annually as people who have not named a charity in their will.³ Among those nonprofits that are already seeking planned gifts, most can be doing a much more effective job of it. Regardless of one’s experience or the size of one’s organization, this book will help development professionals either create or enhance philanthropic planning programs while helping others better understand the marketing challenges faced by nonprofit organizations. While this book will not explore the technical side of philanthropic planning, it will provide detailed information about the marketing of planned gifts.

If one works for a small to mid-sized nonprofit organization, it is easy to think that the organization is too small to worry about marketing planned gifts with the expense of doing so incurred now while the return is garnered at some point in the future. If one works for a mid-sized to large nonprofit organization, it is easy to think that the organization has already mastered the art of planned gift marketing. However, both perspectives are incorrect.

While small to mid-sized organizations might not be prepared to speak with donors about a wide array of planned giving instruments, such organizations can certainly accept gifts of stock. In addition, they can also easily encourage donors to demonstrate their support through a charitable bequest. Charities with mature planned giving programs estimate that deferred gifts, consisting primarily of bequests, make up 70 percent to 80 percent of all planned gifts,⁴ writes Kathryn W. Miree, President of Kathryn W. Miree & Associates. So, if an organization does nothing else in the area of planned gift marketing other than promote bequest giving, it will have accomplished a great deal. Even large organizations can benefit from doing more to educate individuals about the value of bequest giving.

More complex gift opportunities can be established easily by working with a community foundation that offers a charitable gift annuity (CGA) program. Even for the smallest organizations, a CGA program may provide virtually no risk and limited expense. (A glossary of gift planning terms can be found at the end of the book.) Many community foundations around the country allow nonprofit organizations to market CGAs. A donor makes the gift to the community foundation and receives regular income from the community foundation. Upon the donor’s death, a fund is established and the income from the community foundation is given to the nonprofit organization.

While mid-sized to large organizations might already have sophisticated marketing efforts in place, learning about the donor-centered approach described in this book may help achieve even greater outcomes. One can discover a new idea or a new perspective in an old idea in this book. Or, current strategies and tactics might be validated by the text, which could prove enormously useful when budgeting and when trying to bring along others within the organization.

Percentage of Americans with a Planned Gift

It is difficult to estimate the percentage of Americans who have made a planned gift or planned gift commitment. For starters, there is some debate about what is and is not a planned gift. For example, some organizations consider a gift of appreciated stock to be a planned gift. After all, a gift of stock often avoids capital gains tax, may involve a financial advisor, and always involves an element of planning. Fortunately, a number of research projects over the past several years have helped the nonprofit community come closer to understanding how many individuals have made planned gift commitments and what the potential is for growth.

While most Americans have the ability to make a planned gift, the research reveals that relatively few have actually done so and that vastly more are willing to consider such gifts. This means two things. First, there is a significant gap in what traditional planned-gift marketing is achieving and what people are willing to consider. Second, traditional planned-gift marketing is just scratching the surface of planned giving potential.

By better understanding what the sector has achieved, development professionals will be poised to understand the overall potential for planned giving. Individual organizations will be able to do some very basic benchmarking while setting appropriate goals that take into account both what the sector is doing and what the potential for growth is.

Dr. Russell N. James, III, then of the University of Georgia Institute for Nonprofit Organizations, looked at the rate of planned giving among older Americans. Specifically, James studied charitable bequest giving since that is, by far, the most popular type of planned gift instrument. James found that among Americans over the age of 50, only 5.3 percent had made a charitable bequest upon death.⁵ This figure comes from data collected by the University of Michigan Health and Retirement Study, a longitudinal study from 1995-2006 sponsored by the National Institute on Aging that tracked the deaths of over 6,000 study participants. The 5.3 percent figure is one-third lower than the rate of bequest commitment cited in Planned Giving in the United States 2000: A Survey of Donors (NCPG). The 2000 survey reported that 8 percent of Americans surveyed had made a charitable bequest commitment. However, the figure—identified in the Health and Retirement Study and cited within Giving USA 2009—is within the margin of error cited in the NCPG survey report. For these reasons, this book will use the 5.3 percent figure when describing the percentage of Americans making a charitable bequest while recognizing that the figure might be somewhat lower if Americans under the age of 50 were included.

Looking at a less popular form of planned giving, the NCPG Survey found that 1 percent of those responding said that they have established a charitable remainder trust (CRT).⁶

Compellingly, the Center on Philanthropy at Indiana University found that 33 percent of respondents would be willing to consider a charitable bequest.⁷ The NCPG Survey found that 5 percent were considering a CRT. Figure 1.1 illustrates the difference between the percentage of donors with a bequest or trust commitment and the percentage of people willing to consider making such gifts.

The Stelter Company conducted a survey that found that once individuals know at least a little bit about various gift planning instruments or techniques, half of the individuals would be willing to consider making at least some type of planned gift or had already done so.⁸ During the 11-minute survey call, the interviewer quickly described six different gift planning options without going into great detail about any single option. While information clearly has an impact on what individuals are willing to consider, relatively little information is required in order to inspire a fairly significant increase in interest. However, Stelter also discovered that as the age of respondents increased, the receptivity to planned giving decreased. Among those age 70 and over, only 33 percent would be willing to consider a planned gift.⁹ So, nonprofit organizations need to do a more effective job educating prospects, and they need to do so while prospects are younger.

FIGURE 1.1

Actual versus Considering: Bequests and CRTs

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Among older Americans, CGAs can help donors make significant gifts while offering a measure of financial security by providing them with a regular income. However, based on extrapolation from the last survey of the American Council on Gift Annuities, there might only be as many as 400,000 gift annuities in force, according to Frank Minton, Senior Advisor at PG Calc and former ACGA board chair. That number, however, does not represent the number of donors who have elected this form of planned gift vehicle; many donors have established more than one annuity. Enormous potential for increasing the number of CGA donors exists as those figures represent only a small percentage of the senior population. The market of older Americans continues to grow, thereby increasing the potential for more CGAs. In 2004, there were 36.3 million Americans age 65 or older. By 2050, that number will increase by 147 percent to 86.7 million, 21 percent of the U.S. population.¹⁰

For 2008, the Center on Philanthropy estimated that Americans contributed $22.66 billion through charitable bequests.¹¹ Even if the sector would have convinced 6.3 percent of Americans rather than 5.3 percent to make a charitable bequest, an additional $4.53 billion might have been raised. With relatively incremental changes in marketing effectiveness, nonprofit organizations can realize significant increases in revenue. In 2008, bequest revenue accounted for 7 percent of all contributed dollars.¹² If incremental changes in marketing had increased the percentage of Americans making a bequest commitment from 5.3 percent to 6.3 percent, bequest giving might have accounted for 9 percent of all giving. Now, imagine if the nonprofit sector significantly enhanced its marketing effectiveness. Imagine if the percentage of Americans engaging in bequest giving increased by one-third. This is not an idle fantasy. In the United Kingdom, the Remember a Charity consortium states that 7 percent of the public there has named a charity in their will.¹³ Even with that rate of success, the British are not content and are engaged in a national campaign that seeks to boost the bequest giving rate still further.

With a donor-centered marketing approach, nonprofit organizations can encourage more individuals to consider a planned gift and more effectively close gifts from those considering action. This could, for example, shrink the gap between the 5.3 percent who make a charitable bequest and the 33 percent considering it or the 1 percent with a CRT and the 5 percent willing to consider it as more individuals pondering planned gifts actually make them.

Five Common Myths about Planned Giving

While there is enormous potential for the nonprofit sector to significantly grow the amount of revenue developed from planned gifts, the sector continues to limit itself. A number of myths surround the professional practice of philanthropic planning. These myths can lead organizations to take no action or to take the wrong action where planned giving is concerned. The following five common myths are rebutted.

Myth 1: Planned giving is very difficult. The best kept secret about planned giving is that it is just not that difficult. Admittedly, for a wide variety of reasons, there are plenty of people who like to think that planned giving is daunting. From time to time, planned giving can even pose a real challenge that can lead people to believe it is always very complicated. However, for the most part, planned giving is simple. If one knows how to generate current gifts, she is well on her way to being able to secure planned gifts. After all, planned giving is just like every other type of fundraising: one has to identify prospects, cultivate them, and ask for the gift. Most large nonprofit organizations may employ an entire, well-staffed gift planning department to handle all types of planned gifts, while most smaller organizations simply add planned giving to the director of development or major gift officer portfolio of responsibilities. Too many small, and even mid-sized organizations, simply ignore planned giving altogether. However, with the vast majority of planned gifts falling into one of three simple categories—bequests, CGAs, and gifts of stock—there is no reason why all organizations cannot be engaged in some form of planned giving program. While some organizations may never move beyond simply promoting bequest giving and other organizations may grow their program over time to include more sophisticated giving options, virtually all organizations can do something to encourage some type of planned giving.

Myth 2: One needs to be a planned giving expert to be involved in gift planning. One does not need to be an expert. However, one does need to be knowledgeable. Fortunately, of all planned gifts, the vast majority are simple bequests. Charitable gift annuities and stock gifts are also popular forms of planned giving. The more complex forms of planned giving (i.e., charitable lead trusts, charitable remainder annuity trusts, real estate gifts, etc.) make up only a small fraction of all planned gifts. For the more complex transactions, one simply needs to be aware of them and know who to call for assistance when the need arises. The Partnership for Philanthropic Planning (formerly the National Committee on Planned Giving) has found that since 2000, there are fewer planned giving specialists employed by nonprofit organizations and more development professionals now doing gift planning along with their other responsibilities.¹⁴ Increasingly, organizations are taking a more holistic approach to fundraising and development professionals are expected to know just enough to know when to suggest an appropriate planned gift instead of a current gift option. For technical advice, donors are more often seeking input from professional advisors other than development professionals. The Partnership has found that even with the simple bequest, 4 percent of such donors reported hearing of this option from a legal or financial advisor in 1992 compared with 28 percent in 2000. Among CRT donors, 70 percent learned of this giving option from a legal or financial advisor. So, a development professional does not need to be the technical expert for the donor. However, development professionals must be knowledgeable enough to earn a seat at the table with the donor and his trusted advisors in order to assist the donor in fulfilling his philanthropic aspirations while taking care of other needs.

Myth 3: All planned gifts are deferred gifts. Many organizations are reluctant to commit the necessary resources to planned giving because they incorrectly believe that all planned gifts are deferred gifts that will take decades to be realized. While it is certainly true that bequest expectancies represent deferred gifts, they are not necessarily deferred for decades. Depending on the size and age of the pool of bequest expectancies, some gifts will be realized within three to five years of commitment based on basic actuarial forecasts, and sometimes sooner. Other types of planned gifts such as CGAs represent an immediately bookable asset for nonprofit organizations. Gifts of stock also represent an immediately bookable contribution. So, organizations that commit resources to planned gift marketing, can see a return on investment in a very reasonable time frame.

Myth 4: Good marketing focuses on organizational needs. While it is essential for an organization to have a compelling case for support, a great marketing effort will focus on the donor. Understanding what motivates a donor and knowing what a donor’s interests are, then matching the organization’s needs to the donor’s motivations and interests is part of the core of donor-centered marketing. There are plenty of good causes out there. Show a donor how an organization can help realize his philanthropic aspirations while ensuring that the needs of loved ones are met, and one will be more likely to secure the gift. By focusing exclusively on the organization’s needs, one will be less likely to secure a gift. By treating a donor file as a homogenous group, one will be less likely to secure a gift. Donor-centered marketing, and not just marketing, will help build stronger relationships and secure more gifts.

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IN THE REAL WORLD

Marketing versus Donor-Centered Marketing in Practice

An elderly woman in Philadelphia contributed a $25,000 charitable gift annuity to a well-known hospital in New York City. In addition to sending an acknowledgment letter, the development officer contacted the donor by telephone to thank her for her generous gift and to arrange a meeting when he was due to be in Philadelphia. So far in this story, the development officer has behaved in a donor-centered way. He has personally thanked the donor, learned a bit about why she made the gift, and has arranged to meet with the donor to learn more about her and her philanthropic interests. To recognize her generous support, the development officer invited the donor to lunch which she accepted.

When they got together, the development officer picked up the donor at her home and drove her to the Four Seasons Hotel for lunch in the very lavish Fountain Room. The donor was appalled. She refused to be seated and told the development officer that lunch in the more casual, and less expensive, Swan Lounge would be more appropriate.

When relating the story to a friend, the donor expressed her outrage that the hospital would waste her money by taking her out to such a fancy restaurant. She even thought the more informal Swan Lounge was too much. When asked if she would be making another gift to the hospital, she said, Absolutely not! They waste too much money.

While lunch at an exclusive restaurant might be something that donors in New York might appreciate, this frugal Philadelphian most certainly did not. Unfortunately, the development officer, while trying to do the right thing, made a simple mistake. He assumed something about the donor that he did not know. A more donor-centered approach would have been for the development officer to simply have asked the following in the initial telephone contact, I’ll be in Philadelphia next Wednesday and would love to talk with you more over lunch. Would you be available? . . . Great! Where would you like to go? With that one simple question, the development officer would have remained donor centered, would have enhanced the relationship, and would likely have secured another gift. Sometimes donor-centered marketing really is that easy.

Myth 5: Planned gift marketing should be passive. Except when working with major donors, many organizations believe that planned gift marketing should be relatively passive. In other words, planned gift donors should self-identify their interest before they are asked for a gift. Organizations that would never think twice of picking up the telephone and soliciting annual fund gifts would never use the telephone to solicit CGAs. After all, if someone is interested in a CGA, she would respond to the advertisement in the newsletter. The reality is that those organizations that are proactive in their marketing are enjoying greater success than would otherwise be possible. Planned giving is fundraising. The same fundamental principles apply.

There Has Never Been a Better Time

There has never been a better time to engage in a planned giving program. The population is aging, donors are more aware of their gift planning options, more individuals have wills, and generations beyond the Boomer have demonstrated they possess philanthropic values. Organizations that have recognized the opportunity and have worked to effectively cultivate and ask for planned gifts have experienced dramatic philanthropic growth in recent decades.

As the population gets older and passes on, vast sums of assets will be passed from one generation to the next. The Center on Wealth and Philanthropy at Boston College projects that at least $41 trillion (in 1998 dollars) will transfer to the next generation by 2052. Of that transfer, at least $6 trillion could go to nonprofit organizations, according to researchers John J. Havens and Paul G. Schervish (see Table 1.1). The numbers could be much greater.

The Center on Philanthropy provides some evidence that the nonprofit sector is, in fact, beginning to benefit from the leading edge of the wealth transfer. The report reveals that bequest giving, when adjusted for inflation, has almost doubled from 2004-2008 ($116.88 billion) compared with the period 1968-1972 ($60.22 billion).

TABLE 1.1

Projections for Intergenerational Wealth Transfer, 1998-2052

Source: John J. Havens and Paul G. Schervish, Why the $41 Trillion Wealth Transfer Estimate Is Still Valid, Center on Wealth and Philanthropy at Boston College, 2003.

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In addition to the positive impact of the wealth transfer on planned giving results, a number of the more recent research studies provide a greater understanding of donor behavior and how donors view planned giving. The nonprofit sector has also gained a greater appreciation for the role of sound marketing in the planned giving process; the creation of the National Committee on Planned Giving (now the Partnership for Philanthropic Planning) in 1988 offers some evidence of this as gift planning professionals came together to share ideas, provide training programs, and offer other